Bloomberg News

MetroPCS Talked With Eight Companies on Way to T-Mobile Merger

November 17, 2012

MetroPCS Communications Inc. (S:US) agreed to a merger with T-Mobile USA after holding a range of talks with at least eight other companies, including one that offered $13.39 a share in cash and stock, according to a filing.

The unnamed suitor, referred to as “Company G,” decided not to go forward with the deal in February, MetroPCS said yesterday in a proxy filing (PCS:US) to investors. People familiar with the matter have identified Sprint Nextel Corp. as the company bidding for MetroPCS at the time. MetroPCS ultimately made a deal with Deutsche Telekom AG (DTE), T-Mobile’s owner, which announced plans on Oct. 3 to merge the two businesses.

MetroPCS shares closed yesterday at $10.76, about 20 percent less than Sprint’s February offer. That bid, which included $5.50 in cash, represented a 30 percent premium over MetroPCS’s shares at the time and a roughly 60 percent premium over their price when the Richardson, Texas-based company first received a formal offer from Sprint in December.

Sprint, the third-largest U.S. wireless carrier, has considered making a counteroffer to the T-Mobile bid, people familiar with the situation said last month. The company will probably study yesterday’s filing for insight into the T-Mobile- MetroPCS deal, said Walt Piecyk, an analyst with BTIG LLC.

“The filing could provide Sprint more details to consider whether to launch a competitive bid for MetroPCS,” Piecyk, who is based in New York, said in an e-mail.

Bill White, a spokesman for Overland Park, Kansas-based Sprint, declined to comment, as did MetroPCS and T-Mobile.

T-Mobile Terms

Under the T-Mobile deal, Deutsche Telekom will hold 74 percent of the merged business and pay MetroPCS shareholders $1.5 billion in cash. The combined entity will keep the T-Mobile name and be run by John Legere, the former chief executive officer of Global Crossing Ltd., who took charge of T-Mobile USA in September.

MetroPCS had initially sought to retain more control of the combined company, according to yesterday’s filing. It had weighed giving up the cash offer to get 51 percent control -- terms that Deutsche Telekom refused. Over the course of eight months of negotiations, executives from Deutsche Telekom and MetroPCS met in Germany, Dallas, Boston, New York and Athens.

Sprint rekindled talks with MetroPCS in August, before the deal with T-Mobile was set. That month, Sprint said President Keith Cowan, who handled strategic planning for the carrier, would be stepping down. A senior executive from Sprint, described as Company G, told T-Mobile that the reasons why the deal hadn’t proceeded earlier in the year were no longer applicable. Company G indicated that it was considering another bid, according to the filing.

Softbank Investment

On Oct. 15, Softbank Corp. agreed to buy a stake of about 70 percent in Sprint for $20.1 billion. The Japanese company will pay $12.1 billion to Sprint shareholders, and the deal includes $8 billion of new capital. That has provided Sprint will funds to make its own acquisitions.

Sprint also has seen its stock more than double in value since the February MetroPCS talks. The shares fell 1.1 percent to $5.48 yesterday.

According to the filing, a senior Company G executive indicated in October that his company was still considering a bid for MetroPCS and that if the T-Mobile deal moved forward, “he hoped any breakup fee payable by MetroPCS to pursue an alternative transaction would be reasonable.”

Under its deal with Deutsche Telekom, MetroPCS would pay $150 million if it backs out of the arrangement. The reverse breakup fee for T-Mobile is $250 million. Bonn-based Deutsche Telekom is prepared for a counterbid from Sprint and would consider better terms if necessary, a person familiar with the matter said in October.

The deal is the latest attempt by Deutsche Telekom CEO Rene Obermann to revive the fortunes of T-Mobile, the fourth-largest U.S. carrier, more than a decade after the German company entered the American market. The combined entity will have sales of $24.8 billion and 42.5 million subscribers -- still well behind Verizon Wireless, AT&T Inc. and Sprint.

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net;

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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